How to Retire at 62 With Little Money: Tips and Example

Retiring at 62 with little money can feel daunting, but it is possible with the right strategies. Many people reach their early 60s without a large nest egg. However, they can still create a sustainable lifestyle by combining Social Security benefits, part-time income and careful budgeting. Understanding how to reduce expenses, adjust expectations and make the most of limited savings can open a path to financial independence, even with modest resources.

Ask a financial advisor about the best way to financially prepare for your retirement.

Retiring early with limited savings requires balancing income sources, cutting expenses and planning around benefits. These tips and strategies highlight ways to make resources last longer, reduce financial pressure and create stability during the years before and after Medicare eligibility.

When savings are limited, a conservative withdrawal approach helps funds last longer. Some retirees adopt a 2–3% withdrawal rate instead of the traditional 4–5% rule, particularly in the earlier years. This is especially the case in earlier years. If you have traditional IRAs or 401(k)s, consider holding off on withdrawals until at least age 65 to 67. This will allow your accounts to continue growing tax-deferred.

Instead, consider bridging the gap with taxable accounts, part-time earnings or home equity if available.

Housing often accounts for the largest retirement expense. Selling a home in a high-cost market and moving to a smaller property or a lower-cost region can free up equity and reduce monthly bills. Some retirees also consider house hacking, a strategy that involves renting out a room or part of their property to generate steady income.

If you claim Social Security at 62 and continue working, earnings above $23,400 in 2025 temporarily reduce benefits. For every $2 earned over this limit, $1 is withheld from benefits. In the year you reach full retirement age, the higher limit of $62,160 in 2025 applies. This means only $1 is withheld for every $3 earned above that amount.¹

Relocating to states with no income tax, such as Florida, Texas or Nevada, can stretch limited funds. Even within a state, moving from an urban area to a smaller town can reduce costs like property taxes and everyday spending.

Since Medicare eligibility begins at 65, it is important to factor in private insurance or ACA marketplace premiums into your budget. Consider setting aside a portion of your savings specifically for this three-year gap.

Imagine you are 62 with $60,000 in savings, no pension and a modest home that is nearly paid off. You decide to claim Social Security right away, earning the average retirement benefit as of August 2025: $1,955 per month.² To reduce expenses, you sell your larger house and buy a smaller condo in a lower-cost region. This frees up $80,000 in equity and lowers property taxes and maintenance.

To bridge the gap until Medicare at 65, you purchase an Affordable Care Act plan with premiums partially offset by subsidies, given your income. You also take on a part-time job that pays $12,000 annually while keeping total earnings below the Social Security earnings limit. This adds income without reducing your benefit.

From your savings, you withdraw about 3% annually: roughly $1,800 in the first year. This covers irregular costs while preserving most of your nest egg. Once you hit full retirement age, you can work more without Social Security reductions. Your savings and home equity stay available for emergencies, giving you flexibility even when starting from a small balance.

This combination of Social Security, modest work, downsizing and careful withdrawals can potentially make retiring at 62 feasible.

Even with limited savings at 62, there are ways to strengthen your financial outlook. Adjusting the timing of income, making strategic choices with Social Security and planning around healthcare can all help create more stability over the long run.

Working even a few extra years can make a big difference. Extending employment until age 64 or 65 means fewer years of withdrawals, additional contributions and more time for investments to grow. For example, if you are eligible for $1,955 per month at age 62, delaying your benefits until full retirement age at 67 could increase them to just under $2,800 per month, and close to $3,500 if you wait until age 70.

If your Social Security benefit covers most expenses, you might draw just enough from retirement accounts each year to stay within a lower tax bracket. This approach provides cash flow while reducing required minimum distributions later.

Converting portions of a traditional IRA or 401(k) into a Roth IRA before Medicare eligibility at 65 can help you lock in today’s tax rates without raising the income that determines Medicare premiums. Once you’re on Medicare, large conversions may trigger higher Part B and Part D costs, so completing them earlier can preserve flexibility.

Preventive care, wellness programs and thoughtful choices in supplemental insurance can lower long-term out-of-pocket costs. Maintaining health not only preserves quality of life but also reduces financial strain over decades.

Knowing how to retire at 62 with little money requires blending creativity with careful planning. By combining flexible income streams, housing adjustments, tax-savvy withdrawal strategies and thoughtful healthcare decisions, you can stretch limited savings into a sustainable plan. Even small changes, such as delaying benefits or converting some savings into tax-free income, can shift the outlook significantly. With consistent reevaluation and a willingness to adapt, it is possible to create financial stability and enjoy the freedom of retirement even when starting from a smaller base.

• A financial advisor can help you plan and save for retirement. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
• Consider create a spending floor in retirement. Also known as the “flooring approach,” this means establishing a baseline of guaranteed income to cover essentials like housing, food and healthcare. This can come from Social Security, pensions or annuities, while discretionary spending can draw from investment accounts.

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